Cooper, an
industrial metal of high-demand, is receiving multiple upside signals. The
metal rose by 11% from $9400 to $10,400 per ton on the London Metals Exchange
on October 13-19. Also, an important $10,000 resistance was easily broken as
the trend is currently pointing towards $10,800 per ton.
There are
many reasons for this rally. The demand rose dramatically as global economies
are recovering. But the supply is struggling as fuel prices peaked to record
highs, pushing energy prices above all expectations. That pushed copper
producers and processor expenses way up, even partially tightening output. So,
the supplies of copper are decreasing, causing a deficit in the market. LME
copper stocks fell to the 1974 lows. Available stocks for sale are at 14,200
tonnes, while in September stocks were at 200,000 tonnes.
On the
other hand, the demand for copper is surging as this metal is used in “green”
technologies, such is wind power generation, electric vehicles production, etc.
The copper producer in Chile, Codelco, suggests the demand for copper could go
up by another 2-3% in 2022.
A
combination of these factors pushed prices to record highs.
But now the
picture seems to be changing amid some signs that growth is slowing down.
Copper prices are consolidating within a narrow range of $10,200-10,400 per ton
after a non-stop rally from $9,400 per ton. On the price chart the shadows of
candlesticks pointing up may be seen with the closing below the resistance at
$10,363 per ton. That may point to a weak ability of the bulls to break further
up to new highs. Moreover, there are no additional drivers to push prices
higher, all existing factors are already priced in. Investors may expect that the
Federal Reserve (Fed) members could shed more light on the tapering later this
year. Any indications towards early tapering of stimulus measures may limit the
demand for risky assets including non-ferrous metals. Manufacturing activity
employment indicators and home sales in the United States that are going to be
release later this week, may affect copper prices too.
So, copper prices may head
to a correction of $9,940-10,000 per ton where strong support levels are
located. It may be wise to abstain from buying copper contracts at current high
prices, and wait for the opening of any buy position when prices retreat to the
indicated levels.
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